What is the future of Netflix stock

Netflix share forecast 2021: should the stock be bought after Q4 results?

Netflix shares (NFLX) jumped 13 percent to a new all-time high in after-hours trading on Jan. 19 after the US video streaming company beat analysts' expectations with its fourth quarter earnings report.

The stock rose 65.9 percent in 2020 as the corona lockdowns significantly increased demand for online entertainment.

But given the Covid-19 vaccinations, which should allow restrictions to be lifted later this year and in return weigh on “Stay-At-Home” stocks, the question arises: buy or sell Netflix stock?

Let's take a look at the company's latest performance as well as the experts’s Netflix stock forecast.

FAANG shares outperformed in 2020

FAANG stocks, including Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix, and Alphabets Google (Googl), outperformed the broader stock market over the past year as they benefited greatly from consumer trends during the pandemic . So the Google shares rose by 31 percent. Amazon grew by 76 percent. The S&P 500 Index (which includes 500 of the largest publicly listed companies in the USA) gained only 16 percent in value.

However, since the availability of Covid-19 vaccines was confirmed, FAANG stocks have become more volatile. In the first two weeks of 2021, they became cheaper, while the S&P 500 gained 2.7 percent.

JP Morgan analysts wrote in a research report on Jan. 19, "For the first few days of 2021, our conversations with investors are pointing to real FAANG fatigue and frustration, including tepid participation and uncertainty of how to proceed."

"We believe a number of factors are responsible for the recent FAANG weakness: 1). Rotation into cyclicals; 2). FAANG as a source of money for" newer "parts of the tech industry, including index rebalancing (TSLA) and recent IPOs (ABNB, DASH, etc ...); 3). increased regulatory pressure; and 4). controversy about the role of platforms in current political events. "

Netflix stock price is trending up

Netflix stock has been on an upward trend for nearly a decade. In early 2020, the security was trading at around $ 325 and fell to $ 290 per share in March during the Covid-19 stock market crash. But the price rallied quickly, making new all-time highs, rising to $ 556 in September.

The prospect of Covid-19 vaccines, which should allow governments around the world to relax restrictions, is likely to slow growth in subscribers to online entertainment services like Netflix. In November 2020, the share price dropped to $ 470, but then rose again, ending the year at $ 540.

On January 19, the stock jumped in after-hours US trading (from $ 501.77 to $ 567) after the company released its quarterly results.

Q4 results: More new customers than expected

Netflix gained 8.5 million paying subscribers in Q4 2020, beating internal forecasts and analyst estimates of around 6 million. For the year as a whole, the company recorded a record 37 million new customers, breaking the 200 million user mark.

In the fourth quarter, Netflix had sales of $ 6.64 billion (an increase of 21.5 percent), which is also above analysts' expectations. JP Morgan, for example, had reckoned with $ 6.57 billion. Annual sales rose 24 percent to $ 25 billion and net income rose 47.9 percent to $ 2.76 billion.

Netflix is ​​expanding its global reach: 83 percent of net paying subscribers in 2020 come from outside the US and Canada.

Europe, the Middle East and Africa (EMEA) accounted for 41 percent of net paid new additions, while Asia Pacific (APAC) was the second largest contributor to net paid new additions at 9.3 million, an increase of 65 Percent compared to the previous year, according to the company.

Netflix added, "In Q1 2021, we expect 6 million net paid new additions against 15.8 million in last Q1 which included the impact of the initial Covid-19 lockdowns. As of the beginning of 2018, the number has been in paid memberships has grown from 111 million to 204 million and our average revenue per membership has grown from $ 9.88 to $ 11.02 despite the adverse currency environment. This approach has enabled us to increase sales organically over the past few years Boost $ 4 billion to $ 5 billion. "

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Competitive spreads

"The rapid growth in streaming entertainment has seen long-established competitors like Disney, WarnerMedia and Discovery compete with us in new ways that we have been expecting for many years. Part of the reason we act so fast to drive growth and expand our original content library across a wide range of genres and nations. "

The company is focused on creating original content to keep subscribers interested even after the lockdowns end and amid increasing competition from other video streaming platforms.

Netflix said it is "very close" to achieving positive free cash flow (FCF). It will also look into the possibility of share buybacks to return the capital to shareholders by driving the price higher.

Looking ahead, the company said, "For the full year of 2021, we currently expect free cash flow to be near breakeven (compared to our previous breakeven point of $ -1 billion).

Combined with our cash balance of $ 8.2 billion and our undrawn credit facility of $ 750 million, we believe we no longer need to borrow outside funding to run our day-to-day operations. "

So what's the Netflix share price prediction in 2021?

Netflix share forecast 2021: will the stock maintain its upward trend?

According to MarketBeat, 38 analysts have set the 12-month target at $ 545.28 in their Netflix stock forecast. The low is projected to reach $ 235 and the high can reach $ 700 per share.

Of these 38 ratings, 23 analysts give the stock a “buy” rating, 10 recommend investors hold the stock and 5 recommend it to sell.

Morgan Stanley analysts reiterated their buy recommendation on January 15 with a price target of $ 650. Citigroup and UBS raised their target price from $ 450 to $ 580 per share on January 14th.

JP Morgan has a Netflix stock forecast of $ 628 and an "overweight" rating, suggesting that there is still upside potential for the stock price. "We believe all FAANG names will have normalized top-line growth of 20 percent ... Amazon and Netflix will likely slacken on touch comps, but ecommerce and streaming will remain high, with significant growth potential on a global basis. "

The forecast service WalletInvestor expects the price to grow gradually this year and continue to rise in the longer term.

According to his Netflix share recommendation in 2021, the price will rise from $ 508.84 in February to $ 564.74 in December. By December 2022, the stock is expected to reach $ 642.88. An increase to $ 720.48 is forecast for December 2023 and to $ 885.70 for January 2026.

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